What changed in this filing

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Item 1. Financial Statements

2023-11-08 compared with 2023-08-09 · 133 added, 102 removed, 493 unchanged (32% of the section changed)

4 unchanged sentences

($ in millions, except per common share amounts)

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

8 unchanged sentences

Interest expense, net 32.6 26.8 99.0 71.4

Other (income) expense, net ( 0.2 ) 0.7 ( 0.1 ) ( 0.6 )

Other income, net ( 0.1 ) ( 0.9 ) ( 0.2 ) ( 1.5 )

Total other expense, net 32.5 25.9 98.8 69.9

Income before income taxes 125.4 119.5 235.8 288.5

Income from continuing operations before income taxes 150.7 175.1 386.5 463.6

Income tax provision ( 36.8 ) ( 41.1 ) ( 93.5 ) ( 107.5 )

Income from continuing operations 113.9 134.0 293.0 356.1

Loss from discontinued operations, net of tax — ( 0.8 ) — ( 0.8 )

Net income before non-controlling interest 113.9 133.2 293.0 355.3

3 unchanged sentences

Earnings per common share:

Basic $ 0.54 $ 0.52 $ 1.03 $ 1.24

Diluted $ 0.52 $ 0.51 $ 1.01 $ 1.20

Earnings per share for continuing operations $ 0.66 $ 0.78 $ 1.69 $ 2.01

Loss per share for discontinued operations — ( 0.01 ) — —

Earnings per share $ 0.66 $ 0.77 $ 1.69 $ 2.01

Earnings per share for continuing operations $ 0.64 $ 0.75 $ 1.64 $ 1.95

Loss per share for discontinued operations — — — —

Earnings per share $ 0.64 $ 0.75 $ 1.64 $ 1.95

Weighted average common shares outstanding:

6 unchanged sentences

($ in millions)

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

Net income before non-controlling interest $ 113.9 $ 133.2 $ 293.0 $ 355.3

Other comprehensive income (loss), net of tax:

Other comprehensive (loss) income, net of tax:

Foreign currency translation adjustments ( 31.5 ) ( 64.8 ) 0.6 ( 140.1 )

Other comprehensive income (loss), net of tax 17.2 ( 57.8 ) 32.1 ( 75.3 )

Other comprehensive (loss) income, net of tax ( 31.5 ) ( 64.8 ) 0.6 ( 140.1 )

Comprehensive income 82.4 68.4 293.6 215.2

7 unchanged sentences

($ in millions)

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

ASSETS (unaudited)

33 unchanged sentences

($ in millions)

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

Tempur Sealy International, Inc.

2 unchanged sentences

Shares Issued At Par Shares Issued At Cost Additional Paid in Capital Retained Earnings

Balance, March 31, 2023

Balance, June 30, 2023

$ 9.4 283.8 $ 2.8 111.6 $ ( 3,384.1 ) $ 536.7 $ 3,127.5 $ ( 144.8 ) $ 138.1

11 unchanged sentences

Amortization of unearned stock-based compensation

Balance, June 30, 2023

Balance, September 30, 2023

$ 9.6 283.8 $ 2.8 111.5 $ ( 3,380.9 ) $ 547.1 $ 3,221.4 $ ( 176.3 ) $ 214.1

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Tempur Sealy International, Inc.

2 unchanged sentences

Shares Issued At Par Shares Issued At Cost Additional Paid in Capital Retained Earnings

Balance, March 31, 2022

Balance, June 30, 2022

$ 9.0 283.8 $ 2.8 111.4 $ ( 3,381.3 ) $ 573.6 $ 2,789.5 $ ( 174.5 ) $ ( 189.9 )

12 unchanged sentences

Amortization of unearned stock-based compensation

Balance, June 30, 2022

Balance, September 30, 2022

$ 9.3 283.8 $ 2.8 112.4 $ ( 3,405.8 ) $ 585.3 $ 2,904.4 $ ( 239.3 ) $ ( 152.6 )

4 unchanged sentences

($ in millions)

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Tempur Sealy International, Inc.

18 unchanged sentences

Amortization of unearned stock-based compensation

Balance, June 30, 2023

Balance, September 30, 2023

$ 9.6 283.8 $ 2.8 111.5 $ ( 3,380.9 ) $ 547.1 $ 3,221.4 $ ( 176.3 ) $ 214.1

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Tempur Sealy International, Inc.

17 unchanged sentences

Amortization of unearned stock-based compensation

Balance, June 30, 2022

Balance, September 30, 2022

$ 9.3 283.8 $ 2.8 112.4 $ ( 3,405.8 ) $ 585.3 $ 2,904.4 $ ( 239.3 ) $ ( 152.6 )

4 unchanged sentences

($ in millions)

Six Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

Nine Months Ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES FROM CONTINUING OPERATIONS:

Net income before non-controlling interest $ 293.0 $ 355.3

Adjustments to reconcile net income to net cash provided by operating activities:

Loss from discontinued operations, net of tax — 0.8

Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:

Depreciation and amortization 99.6 93.3

7 unchanged sentences

Changes in operating assets and liabilities 37.4 ( 208.0 )

Net cash provided by operating activities 250.5 66.5

CASH FLOWS FROM INVESTING ACTIVITIES:

Net cash provided by operating activities from continuing operations 479.2 283.5

CASH FLOWS FROM INVESTING ACTIVITIES FROM CONTINUING OPERATIONS:

Purchases of property, plant and equipment ( 153.3 ) ( 216.0 )

Other 0.5 ( 8.8 )

Net cash used in investing activities ( 112.3 ) ( 129.1 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Net cash used in investing activities from continuing operations ( 152.8 ) ( 224.8 )

CASH FLOWS FROM FINANCING ACTIVITIES FROM CONTINUING OPERATIONS:

Proceeds from borrowings under long-term debt obligations 1,491.5 1,904.3

4 unchanged sentences

Repayments of finance lease obligations and other ( 12.8 ) ( 12.6 )

Net cash used in financing activities ( 111.4 ) ( 110.2 )

Net cash used in financing activities from continuing operations ( 303.2 ) ( 234.1 )

Net cash provided by (used in) continuing operations 23.2 ( 175.4 )

Net operating cash flows used in discontinued operations — ( 0.8 )

NET EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS ( 1.0 ) ( 30.4 )

40 unchanged sentences

In May 2023, the Company amended its 2019 Credit Agreement to transition the applicable reference rate from LIBOR to SOFR.

In October 2023, the Company entered into the 2023 Credit Agreement, which uses SOFR as the applicable reference rate.

See "Note 4 - Debt" for additional details.

5 unchanged sentences

Inventories are stated at the lower of cost or net realizable value, determined by the first-in, first-out method , and consist of the following:

June 30, December 31,

September 30, December 31,

(in millions) 2023 2022

12 unchanged sentences

Tempur-Pedic pillows have a warranty term of 3 years, non-prorated.

The Company had the following activity for its accrued warranty expense from December 31, 2022 to June 30, 2023:

The Company had the following activity for its accrued warranty expense from December 31, 2022 to September 30, 2023:

(in millions)

2 unchanged sentences

Warranties charged to accrual ( 18.5 )

Balance as of June 30, 2023 $ 44.0

As of June 30, 2023 and December 31, 2022, $ 19.9 million and $ 17.8 million of accrued warranty expense is included as a component of accrued expenses and other current liabilities and $ 24.1 million and $ 23.8 million of accrued warranty expense is included in other non-current liabilities on the Company's accompanying Condensed Consolidated Balance Sheets, respectively.

Balance as of September 30, 2023 $ 40.6

As of September 30, 2023 and December 31, 2022, $ 18.4 million and $ 17.8 million of accrued warranty expense is included as a component of accrued expenses and other current liabilities and $ 22.2 million and $ 23.8 million of accrued warranty expense is included in other non-current liabilities on the Company's accompanying Condensed Consolidated Balance Sheets, respectively.

(e) Allowance for Credit Losses .

2 unchanged sentences

The Company estimates losses over the contractual life using assumptions to capture the risk of loss, even if remote, based principally on how long a receivable has been outstanding.

As of June 30, 2023, the Company's accounts receivable were substantially current.

As of September 30, 2023, the Company's accounts receivable were substantially current.

Other factors considered include historical write-off experience, current economic conditions and also factors such as customer credit, past transaction history with the customer and changes in customer payment terms.

1 unchanged sentence

The allowance for credit losses is included in accounts receivable, net in the accompanying Condensed Consolidated Balance Sheets.

The Company had the following activity for its allowance for credit losses from December 31, 2022 to June 30, 2023:

The Company had the following activity for its allowance for credit losses from December 31, 2022 to September 30, 2023:

(in millions)

2 unchanged sentences

Write-offs charged against the allowance ( 1.8 )

Balance as of June 30, 2023

Balance as of September 30, 2023

TEMPUR SEALY INTERNATIONAL, INC.

7 unchanged sentences

The fair values of these material financial instruments are as follows:

(in millions) June 30, 2023 December 31, 2022

(in millions) September 30, 2023 December 31, 2022

2029 Senior Notes $ 668.4 $ 672.7

6 unchanged sentences

(2) Net Sales

The following table presents the Company's disaggregated revenue by channel, product and geographical region, including a reconciliation of disaggregated revenue by segment, for the three months ended June 30, 2023 and 2022:

Three Months Ended June 30, 2023 Three Months Ended June 30, 2022

Three Months Ended September 30, 2023 Three Months Ended September 30, 2022

(in millions) North America International Consolidated North America International Consolidated

14 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)

Six Months Ended June 30, 2023 Six Months Ended June 30, 2022

Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022

(in millions) North America International Consolidated North America International Consolidated

15 unchanged sentences

Foreign currency translation and other 0.6 1.9 2.5

Balance as of June 30, 2023 $ 609.6 $ 471.3 $ 1,080.9

Balance as of September 30, 2023 $ 607.9 $ 456.9 $ 1,064.8

TEMPUR SEALY INTERNATIONAL, INC.

2 unchanged sentences

Debt for the Company consists of the following:

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

(in millions, except percentages) Amount Rate Amount Rate Maturity Date

13 unchanged sentences

Total long-term debt, net $ 2,538.5 $ 2,739.9

(1) Interest at SOFR index plus 10 basis points of credit spread adjustment, plus applicable margin of 1.375 % as of June 30, 2023.

(1) Interest at SOFR index plus 10 basis points of credit spread adjustment, plus applicable margin of 1.375 % as of September 30, 2023.

(2) Interest at LIBOR plus applicable margin of 1.250 % as of December 31, 2022.

2 unchanged sentences

(5) New finance lease obligations are a non-cash financing activity.

As of June 30, 2023, the Company was in compliance with all applicable debt covenants.

As of September 30, 2023, the Company was in compliance with all applicable debt covenants.

2023 Credit Agreement

On October 10, 2023, the Company entered into the 2023 Credit Agreement with a syndicate of banks.

The 2019 Credit Agreement, as amended, provides for a $ 725.0 million revolving credit facility and a $ 725.0 million term loan facility.

On May 19, 2023, the Company entered into an amendment to the 2019 Credit Agreement that replaced LIBOR with SOFR as the reference rate for U.S.

dollar-denominated loans.

Borrowings under the amended Credit Agreement will bear interest at a base rate or a rate equal to SOFR plus an applicable margin.

For the revolving credit facility and the term loan facility such applicable margins are determined by a pricing grid based on the consolidated total net leverage ratio of the Company.

The Company had $ 282.0 million in outstanding borrowings under its revolving credit facility as of June 30, 2023.

Total remaining availability under the revolving credit facility was $ 442.4 million after a $ 0.6 million reduction for outstanding letters of credit as of June 30, 2023.

The 2023 Credit Agreement replaced the Company's 2019 Credit Agreement.

The 2023 Credit Agreement provides for a $ 1.15 billion revolving credit facility, a $ 500.0 million term loan facility, and an incremental facility in an aggregate amount of up to the greater of $ 850.0 million and additional amounts subject to the conditions set forth in the 2023 Credit Agreement, plus the amount of certain prepayments, plus an additional unlimited amount subject to compliance with a maximum consolidated secured leverage ratio test.

The 2023 Credit Agreement has a $ 60.0 million sub-facility for the issuance of letters of credit.

Borrowings under the 2023 Credit Agreement will generally bear interest, at the election of Tempur Sealy International and the other subsidiary borrowers, at either (i) base rate plus the applicable margin, (ii) "Eurocurrency" rate plus the applicable margin, (iii) "RFR" rate plus the applicable margin or (iv) a "Term Benchmark" rate plus the applicable margin.

The aforementioned rates are defined in the 2023 Credit Agreement, which was previously filed as an exhibit to the Company's Current Report on Form 8-K, which was filed on October 11, 2023.

For the revolving credit facility and the term loan facility (a) the initial applicable margin for base rate advances was 0.625 % per annum and the initial applicable margin for Eurocurrency rate, RFR rate and Term Benchmark advances was 1.625 % per annum, and (b) following the delivery of financial statements for the fiscal quarter ending March 31, 2024 and for subsequent fiscal quarters, such applicable margins will be determined by a pricing grid based on the consolidated total net leverage ratio of the Company.

Obligations under the 2023 Credit Agreement are guaranteed by the Company's existing and future direct and indirect wholly-owned domestic subsidiaries, subject to certain exceptions and are secured by a security interest in substantially all of Tempur Sealy International’s and the other subsidiary borrowers' domestic assets and the domestic assets of each subsidiary guarantor, whether owned as of the closing or thereafter acquired, including a pledge of 100.0 % of the equity interests of each subsidiary owned by the Company or a subsidiary guarantor that is a domestic entity (subject to certain limited exceptions) and 65.0 % of the voting equity interests of any direct first tier foreign entity owned by the Company or a subsidiary guarantor.

The 2023 Credit Agreement requires compliance with certain financial covenants providing for maintenance of a minimum consolidated interest coverage ratio, maintenance of a maximum consolidated total net leverage ratio, and maintenance of a maximum consolidated secured net leverage ratio.

The consolidated total net leverage ratio is calculated using consolidated indebtedness less netted cash (as defined below).

Consolidated indebtedness includes debt recorded on the Condensed Consolidated Balance Sheets as of the reporting date, plus letters of credit outstanding in excess of $ 60.0 million and other short-term debt.

The Company is allowed to subtract from consolidated indebtedness an amount equal to 100.0 % of the domestic and foreign unrestricted cash ("netted cash").

As of September 30, 2023, netted cash was $ 91.6 million.

The 2023 Credit Agreement contains certain customary negative covenants, which include limitations on liens, investments, indebtedness, dispositions, mergers and acquisitions, the making of restricted payments, changes in the nature of business, changes in fiscal year, transactions with affiliates, use of proceeds, prepayments of certain indebtedness, entry into burdensome agreements and changes to governing documents.

The 2023 Credit Agreement also contains certain customary affirmative covenants and events of default, including upon a change of control.

The Company is required to pay a commitment fee on the unused portion of the revolving credit facility, which initially will be 0.25 % per annum and following the delivery of financial statements for the fiscal quarter ending March 31, 2024 and for subsequent fiscal quarters, such fees will be determined by a pricing grid based on the consolidated total net leverage ratio of the Company.

This unused commitment fee is payable quarterly in arrears and on the date of termination or expiration of the commitments under the revolving credit facility.

The Company and the other borrowers also pay customary letter of credit issuance and other fees under the 2023 Credit Agreement.

The maturity date of the 2023 Credit Agreement is October 10, 2028.

Amounts under the revolving credit facility may be borrowed, repaid and re-borrowed from time to time until the maturity date.

The term loan facility is subject to quarterly amortization as set forth in the 2023 Credit Agreement.

In addition, the term loan facility is subject to mandatory prepayment in connection with certain debt issuances, asset sales and casualty events, subject to certain reinvestment rights.

Voluntary prepayments and commitment reductions under the 2023 Credit Agreement are permitted at any time without payment of any prepayment premiums.

2019 Credit Agreement

The Company used the proceeds from the 2023 Credit Agreement to refinance outstanding borrowings under the 2019 Credit Agreement and terminated the existing revolving credit commitments.

The 2019 Credit Agreement, as amended, initially provided for a $ 725.0 million revolving credit facility and a $ 725.0 million term loan facility.

The Company had $ 135.0 million in outstanding borrowings under its revolving credit facility as of September 30, 2023.

Total remaining availability under the revolving credit facility was $ 589.4 million after a $ 0.6 million reduction for outstanding letters of credit as of September 30, 2023.

Securitized Debt

The Company and certain of its subsidiaries are party to a securitization transaction with respect to certain accounts receivable due to the Company and certain of its subsidiaries (as amended, the "Accounts Receivable Securitization").

As of September 30, 2023, total availability under the Accounts Receivable Securitization was $ 28.4 million.

On April 6, 2023, the Company and certain of its subsidiaries entered into a second amendment to the Accounts Receivable Securitization.

1 unchanged sentence

While subject to a $ 200.0 million overall limit, the availability of revolving loans varies over the course of the year based on the seasonality of the Company's accounts receivable.

As of June 30, 2023, the Company had completely drawn on the outstanding availability of the Accounts Receivable Securitization with borrowings of $ 175.3 million.

TEMPUR SEALY INTERNATIONAL, INC.

3 unchanged sentences

(a) Treasury Stock.

As of June 30, 2023, the Company had approximately $ 774.5 million remaining under its share repurchase authorization.

The Company did not repurchase shares, under the program, during the three months ended June 30, 2023.

The Company repurchased 4.4 million shares, under the program, for approximately $ 117.0 million during the three months ended June 30, 2022.

The Company repurchased 0.1 million and 16.6 million shares, under the program, for approximately $ 5.0 million and $ 566.2 million during the six months ended June 30, 2023 and 2022, respectively.

In addition, the Company acquired shares upon the vesting of certain restricted stock units ("RSUs") and performance restricted stock units ("PRSUs"), which were withheld to satisfy tax withholding obligations during each of the three and six months ended June 30, 2023 and 2022, respectively.

The shares withheld were valued at the closing price of the stock on the New York Stock Exchange on the vesting date or first business day prior to vesting, resulting in approximately $ 0.3 million and $ 0.2 million in treasury stock acquired during the three months ended June 30, 2023 and 2022, respectively.

The Company acquired approximately $ 31.0 million and $ 45.8 million in treasury stock during the six months ended June 30, 2023 and 2022, respectively.

As of September 30, 2023, the Company had approximately $ 774.5 million remaining under its share repurchase authorization.

The Company did not repurchase shares, under the program, during the three months ended September 30, 2023.

The Company repurchased 1.0 million shares, under the program, for approximately $ 25.0 million during the three months ended September 30, 2022.

The Company repurchased 0.1 million and 17.6 million shares, under the program, for approximately $ 5.0 million and $ 591.2 million during the nine months ended September 30, 2023 and 2022, respectively.

In addition, the Company acquired shares upon the vesting of certain restricted stock units ("RSUs") and performance restricted stock units ("PRSUs"), which were withheld to satisfy tax withholding obligations during each of the three and nine months ended September 30, 2023 and 2022, respectively.

The shares withheld were valued at the closing price of the stock on the New York Stock Exchange on the vesting date or first business day prior to vesting, resulting in $ 0.1 million and $ 0.2 million in treasury stock acquired during the three months ended September 30, 2023 and 2022, respectively.

The Company acquired approximately $ 31.0 million and $ 46.0 million in treasury stock during the nine months ended September 30, 2023 and 2022, respectively.

(b) Accumulated Other Comprehensive Loss ("AOCL").

AOCL consisted of the following:

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

(in millions) 2023 2022 2023 2022

13 unchanged sentences

Accrued expenses and other current liabilities consisted of the following:

(in millions) June 30, 2023 December 31, 2022

(in millions) September 30, 2023 December 31, 2022

Wages and benefits $ 97.8 $ 78.0

Unearned revenue 58.8 48.5

Advertising 66.5 64.9

Unearned revenue 64.1 48.5

Taxes 58.7 52.1

5 unchanged sentences

(7) Stock-Based Compensation

The Company's stock-based compensation expense for the three and six months ended June 30, 2023 and 2022 included PRSUs, non-qualified stock options and RSUs.

The Company's stock-based compensation expense for the three and nine months ended September 30, 2023 and 2022 included PRSUs, non-qualified stock options and RSUs.

A summary of the Company's stock-based compensation expense is presented in the following table:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(in millions) 2023 2022 2023 2022

6 unchanged sentences

During the first quarter of 2023, the Company granted PRSUs as a component of the long-term incentive plan ("2023 PRSUs").

The Company has recorded stock-based compensation expense related to the 2023 PRSUs during the three and six months ended June 30, 2023, as it was probable that the Company would achieve the specified performance targets for the performance period.

The Company has recorded stock-based compensation expense related to the 2023 PRSUs during the three and nine months ended September 30, 2023, as it was probable that the Company would achieve the specified performance targets for the performance period.

(8) Commitments and Contingencies

2 unchanged sentences

(9) Income Taxes

The Company's effective tax rates for the three months ended June 30, 2023 and 2022 were 25.7 % and 23.7 %, respectively.

The Company's effective tax rates for the six months ended June 30, 2023 and 2022 were 24.1 % and 23.0 %, respectively.

The Company's effective tax rates for the three and six months ended June 30, 2023 and 2022 differed from the U.S.

The Company's effective tax rates for the three months ended September 30, 2023 and 2022 were 24.4 % and 23.5 %, respectively.

The Company's effective tax rates for the nine months ended September 30, 2023 and 2022 were 24.2 % and 23.2 %, respectively.

The Company's effective tax rates for the three and nine months ended September 30, 2023 and 2022 differed from the U.S.

federal statutory rate of 21.0% principally due to subpart F income (i.e., global intangible low-taxed income, or "GILTI," earned by the Company's foreign subsidiaries), foreign income tax rate differentials, state and local taxes, changes in the Company's uncertain tax positions, the excess tax benefit related to stock-based compensation and certain other permanent items.

7 unchanged sentences

During December 2022, pursuant to the negotiations described above with respect to the APA Program, SKAT and the IRS preliminarily concluded on a mutually acceptable framework ("Preliminary Framework") to resolve the Danish Tax Matter for the 2012 to 2022 tax years.

If ultimately agreed upon by the two tax authorities, the terms of the Preliminary Framework would extend to the years 2023 and 2024, as well.

The Preliminary Framework is not a definitive agreement, but its terms provide updated definitive data for the Company to determine the potential Danish income tax exposure for the 2012 to 2022 tax years as well as the associated deferred tax asset for the U.S.

correlative benefit for such periods.

Subsequent to December 31, 2022, the Company began discussions individually with both SKAT and the IRS regarding the implementation of the Preliminary Framework.

In this regard, it is expected that the Preliminary Framework will be finalized into a definitive agreement in 2023.

Starting January 1, 2023 the Company adopted the terms of the Preliminary Framework in the calculation of the royalty described above.

As such, there is no uncertain income tax liability or deferred tax asset associated with 2023.

On October 12, 2023, the two tax authorities formally signed, pursuant to the APA Program, the bilateral APA case and mutual agreement procedure (the "Mutual Agreement") cases between the U.S.

and the Kingdom of Denmark.

The terms of the Mutual Agreement reflect in all material respects those terms contained in the Preliminary Framework.

It is anticipated that implementation of the terms of the Mutual Agreement (as reflected in the calculation of taxable income in both Denmark and the U.S.

for the years covered in such agreement) will be materially and substantially consistent with those previously recorded in the Company’s Consolidated Balance Sheets as of September 30, 2023 (pursuant to the Preliminary Framework which was preliminary as of that date) and will be completed in the next twelve months.

TEMPUR SEALY INTERNATIONAL, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)

The uncertain income tax liability for the Danish Tax Matter for the years 2012 through 2022 was approximately $ 38.5 million and $ 37.8 million at June 30, 2023 and December 31, 2022, respectively, and is reflected in the Company's Condensed Consolidated Balance Sheet in accrued expenses and other current liabilities.

The deferred tax asset for the U.S.

correlative benefit associated with the accrual of Danish Tax Matter for the 2012 to 2022 tax years was approximately $ 21.6 million for both periods ended June 30, 2023 and December 31, 2022.

As of June 30, 2023, the Company had made the following tax deposits related to assessments received by SKAT for the Danish Tax Matter for the years 2012 through 2016, which are reflected in the Company's Condensed Consolidated Balance Sheet in other current assets:

The uncertain income tax liability for the Danish Tax Matter for the years 2012 through 2022 was approximately $ 37.2 million and $ 37.8 million at September 30, 2023 and December 31, 2022, respectively, and is reflected in the Company's Condensed Consolidated Balance Sheets in accrued expenses and other current liabilities.

Conversely, the deferred tax asset for the U.S.

correlative benefit associated with the accrual of the Danish Tax Matter for the 2012 to 2022 tax years was approximately $ 21.6 million for both periods ended September 30, 2023 and December 31, 2022.

Starting January 1, 2023, the Company adopted the terms of the Preliminary Framework for the calculation of the royalty as described above.

As such, there is no uncertain income tax liability or deferred tax asset associated with the adoption of the terms of the Mutual Agreement.

As of September 30, 2023, the Company had made the following tax deposits related to assessments received by SKAT for the Danish Tax Matter for the years 2012 through 2016, which are reflected in the Company's Condensed Consolidated Balance Sheets in other current assets:

(in millions) USD

1 unchanged sentence

Deposit payments 56.4

If the Company is not successful in concluding the Preliminary Framework for the 2012 to 2022 tax years or if there is a change in facts and circumstances as it relates to the Danish Tax Matter, the Company may be required to further increase its uncertain income tax position associated with this matter, or decrease its deferred tax asset, also related to this matter, which could have a material impact on the Company's reported earnings.

There were no other significant changes in the Danish Tax Matter or other uncertain tax positions during the six months ended June 30, 2023.

(10) Earnings Per Common Share

The following table sets forth the components of the numerator and denominator for the computation of basic and diluted earnings per share for net income attributable to Tempur Sealy International:

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

(in millions, except per common share amounts) 2023 2022 2023 2022

Net income attributable to Tempur Sealy International, Inc.

$ 92.4 $ 90.6 $ 177.7 $ 221.3

Net income from continuing operations, net of income attributable to non-controlling interests $ 113.3 $ 133.5 $ 291.0 $ 354.8

Denominator for basic earnings per common share-weighted average shares 172.2 171.9 172.1 176.2

3 unchanged sentences

Diluted earnings per common share $ 0.64 $ 0.75 $ 1.64 $ 1.95

The Company excluded 0.6 million and 0.4 million shares from the diluted earnings per common share computation because their exercise price was greater than the average market price of Tempur Sealy International's common stock or they were otherwise anti-dilutive for the three and six months ended June 30, 2023 and 2022, respectively.

The Company excludes shares issuable upon exercise of outstanding stock options from the diluted earnings per common share computation because their exercise price was greater than the average market price of Tempur Sealy International's common stock or they were otherwise anti-dilutive.

The Company did not exclude any shares for the three months ended September 30, 2023 and excluded 1.5 million shares for the three months ended September 30, 2022.

The Company excluded 0.2 million and 0.8 million shares for the nine months ended September 30, 2023 and September 30, 2022, respectively.

Holders of non-vested stock-based compensation awards do not have voting rights but do participate in dividend equivalents distributed upon the award vesting.

TEMPUR SEALY INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)

(11) Business Segment Information

5 unchanged sentences

The Company evaluates segment performance based on net sales, gross profit and operating income.

TEMPUR SEALY INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)

The Company's North America and International segment assets include investments in subsidiaries that are appropriately eliminated in the Company's accompanying Condensed Consolidated Financial Statements.

1 unchanged sentence

The following table summarizes total assets by segment:

(in millions) June 30, 2023 December 31, 2022

(in millions) September 30, 2023 December 31, 2022

North America $ 5,476.1 $ 5,161.7

4 unchanged sentences

The following table summarizes property, plant and equipment, net, by segment:

(in millions) June 30, 2023 December 31, 2022

(in millions) September 30, 2023 December 31, 2022

North America $ 728.6 $ 672.1

3 unchanged sentences

The following table summarizes operating lease right-of-use assets by segment:

(in millions) June 30, 2023 December 31, 2022

(in millions) September 30, 2023 December 31, 2022

North America $ 414.9 $ 349.0

2 unchanged sentences

Total operating lease right-of-use assets $ 585.5 $ 506.8

The following table summarizes segment information for the three months ended June 30, 2023:

The following table summarizes segment information for the three months ended September 30, 2023:

(in millions) North America International Corporate Eliminations Consolidated

12 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)

The following table summarizes segment information for the three months ended June 30, 2022:

The following table summarizes segment information for the three months ended September 30, 2022:

(in millions) North America International Corporate Eliminations Consolidated

4 unchanged sentences

Operating income (loss) 205.0 32.6 ( 36.6 ) — 201.0

Income (loss) before income taxes 144.8 34.7 ( 60.0 ) — 119.5

Income (loss) from continuing operations before income taxes 203.0 33.9 ( 61.8 ) — 175.1

Depreciation and amortization (1)

2 unchanged sentences

(1) Depreciation and amortization includes stock-based compensation amortization expense.

The following table summarizes segment information for the six months ended June 30, 2023:

The following table summarizes segment information for the nine months ended September 30, 2023:

(in millions) North America International Corporate Eliminations Consolidated

4 unchanged sentences

Operating income (loss) 505.6 118.1 ( 138.4 ) — 485.3

Income (loss) from continuing operations before income taxes 306.6 75.7 ( 146.5 ) — 235.8

Income (loss) before income taxes 499.1 116.9 ( 229.5 ) — 386.5

Depreciation and amortization (1)

2 unchanged sentences

(1) Depreciation and amortization includes stock-based compensation amortization expense.

The following table summarizes segment information for the six months ended June 30, 2022:

The following table summarizes segment information for the nine months ended September 30, 2022:

(in millions) North America International Corporate Eliminations Consolidated

14 unchanged sentences

(in millions)

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

United States

4 unchanged sentences

The following table summarizes operating lease right-of-use assets by geographic region:

(in millions) June 30, 2023 December 31, 2022

(in millions) September 30, 2023 December 31, 2022

United States $ 405.6 $ 339.6

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements